Good morning. My name is Scott and I will be conference operator today. At this time, I would like to welcome everyone to the SandRidge Energy Fourth Quarter and Full Year 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Duane Grubert, Executive Vice President of Investor Relations and Strategy, you may begin your conference.

Thank you operator, and welcome everyone. Thanks for joining us on the conference call. This is Duane Grubert, EVP of IR and Strategy here at SandRidge. With me today are James Bennett, our President and Chief Executive Officer; John Suter, EVP and Chief Operating Officer; and Julian Bott, EVP and Chief Financial Officer. We would like to remind you that in conjunction with our earnings release and conference call, we have posted slides on our website under the Investor Relations tab that we'll be referencing during the call. Keep in mind today's call contains forward-looking statements and assumptions which are subject to risk and uncertainty, and actual results may differ materially from those projected in these forward-looking statements. Additionally, we will make reference to adjusted net income, adjusted EBITDA, adjusted G&A and other non-GAAP financial measures. A reconciliation of the discussion of those measures can be found on the website. You will also see us file our 10-K next week. Please note the call is intended to discuss SandRidge Energy and not our Public Royalty Trust. Now let me turn the call over to CEO, James Bennett.

Thank you, Duane. Welcome everyone and thank you for joining us. As I always like to cover on these year-end calls, I'll be laying out our strategy and talk about how our recent performance, cost reductions and innovations have set up a compelling shareholder value creation story. I'll also cover the roll-out of an exciting new 60,000 acre Northwest STACK, Meramec and Osage play and adjacent acquisition, our first Meramec well in Major County Oklahoma with an impressive 925 Boe per day IP, record low well cost in the Miss and developments in our Niobrara asset in Colorado, including our first extended reach lateral and the first C bench test. Then John Suter will cover detailed operational update and our CFO, Julian Bott will give a financial update and we'll wrap up with any questions you might have. Let me start with reviewing our strategy for 2017 and then touch on some significant execution steps we've made to put this strategy in motion. I'm going to start with referencing Page 3 of the presentation. We started publishing this page in October of last year and the strategy and the message have remained consistent. We have one of the strongest balance sheets among our peers, have high-graded our Mississippian program to maximize cash flow from that asset and now have a portfolio of high-return projects weighted towards oil. Let me walk through each of these areas outlined on Slide 3. First our balance sheet. We have and will continue to protect this unlevered balance sheet liquidity and maintain a moderate level of outspend. Let's review what we have done here. Our cash is currently around $120 million, that's higher than our cash at the end of the third quarter, even taking into account the $48 million acquisition in early February. We…

Alright, thank you, James. I'm pleased to share with you continued strong execution by our SandRidge team. There's building excitement in virtually every aspect of our business. Let me start with four highlighted items and then we'll zoom into a more detailed view. First let's examine our basic metrics that show production was higher and costs were lower than anticipated. We delivered production at the high end of guidance with oil, NGLs and total equipment production. Our lease operating expenses were lower than guidance at $7.98 per Boe. Second, we are drilling with good efficiency in the right areas. I'll be highlighting the Hebron 4-18 and Castle wells in North Park Basin that each set records in the play. In the Mid-Continent, we'll focus on the Medill well in Major County that is already one of the top performing Meramec oil wells in the county to-date. Third, we're showcasing our position in Northwest STACK. This is a well-verified extension of one of the most active plays in the country. It now gives us additional Meramec and Osage opportunities that create even more diversified inventory. Plus, we have added on that acreage – to that acreage footprint, a recent acquisition of a private operator in Woodward County. Finally, we're adding a second rig in March to accelerate the development of all the opportunities just mentioned. Now, let me tell you what's happening in each asset and provide you with some data so that you can be as excited as I am about our progress. Let's start with Slide 11. Here you see on the inset map, SandRidge's primary regions. In the North Park, our Niobrara resources is 80% oil component, increases value and provides years of future development opportunities with our 1,300 identified 2P locations. In our Mid-Continent asset, we hold…

Thanks John. I'm pleased to have the chance to address where we are from a financial standpoint. The summary is bright as beyond a small building note, we have no outstanding debt whatsoever with $537 million in liquidity. This strong position allows us to develop our portfolio of assets and take advantage of growth opportunities such as the Northwest STACK acquisition, while carefully managing all liquidity and maintaining conservative leverage. Take a look at Slide 23, it's worth highlighting that we recently entered into a new $600 million revolving credit facility with an initial borrowing base of $425 million. The transaction was very positive for SandRidge as it provided us an extra $50 million of cash, lowered the interest rate, eliminated certain financial covenants and moves us back to a conforming RBL. Our liquidity is substantially higher than we anticipated, as we achieved higher than projected EBITDA due to commodity price improvement and our careful management of expenses. LOE, G&A and CapEx all came in under budget. We also realized $22 million from non-core asset sales, and as we noted earlier $50 million of cash was released from escrow by our banks following the refinancing of the old facility. As a result, our cash position today is $120 million, which is higher than at emergence despite funding the $48 million acquisition, when we closed the Northwest STACK. Following the refinancing, our remaining $264 million of convertible unsecured notes mandatorily converted into equity. This simplified our capital structure such that we now have no net debt and only have our undrawn revolver, a small building note and common stock. Our capital structure is now completely unlevered, clean and demonstrates strong liquidity. Now, I'll walk through our key financial measures for the year ended 2016 and 2017 guidance. Production for the year…

[Operator Instruction] Your first question comes from the line of John Aschenbeck with Seaport Global. Your line is open.

Good morning. Thanks for taking my questions and congrats on a nice update. My first question pertains to the implications of 2017 activity ramp. In last night's press release, James and in your prepared remarks just now, you spoke to the potential to begin seeing well growth by the end of 2017, and with an activity ramp during 2017, it seems like you could get some pretty nice momentum heading into 2018. So, I was hoping you could provide a general idea of what oil growth could look like in 2018, ballpark figure if you keep activity levels constant and just maintain two rigs in the Mid-Con and one in the Niobrara. Thanks.

Thanks John. To totally understand the question, probably not ready to give 2018 guidance right now, but I can repeat a couple of the numbers that I said on the call. I think it will give you a reasonable idea of the trajectory. We ended the fourth quarter of 2016 at 28% oil. We'll end the fourth quarter of 2017 at 31%, about 1.1 million barrels fourth quarter 2016 was 1.2 million barrels and our oil product kind of troughed in the third quarter and then it starts to grow in the fourth quarter. So, I can't give you a percentage in 2018 right now. We'll be able to do that later in the year, but you can see the change from fourth quarter to fourth quarter 28% to 31% oil.

Alright. Fair enough, that does help understand the trajectory. It's helpful. And then in the STACK, you know in terms of M&A, what is – what's the remaining opportunity set look like in the Northwest STACK in terms of your ability to continue that acreage right around that 2,000 an acre mark? And then also what's your appetite to add acres there? Are you satisfied with the 60,000 or are you more inclined to build that out?

We've got a $40 million land budget in 2017, think about $9 million of that is for some seismic acquisition and processing, so call it $30 million in change of land. That will predominantly be focused in the Mid-Continent, so our land teams are pretty active looking in the area. We'll certainly look to add acreage in areas and sections where we're drilling and where we like and take advantage of force pooling where we can. There are a number of opportunities in the Northwest STACK. You can look at the permits, there's half a dozen or more private companies there that are pretty active drilling and there is some of the big well-known public guys that are also there. So, I think in our four county areas, we've got about 13 rigs running right now. But there are more opportunities. We like our 60,000 acre position, but we will be opportunistic that position can keep us busy for a while, but if see something, it looks good, it's right in our area of interest and we think is a good risk adjusted return. We might take advantage of that.

Got it. Appreciate that. Then last one from me, so maybe just higher level comments for the basin, and get your thoughts. What was the point of inflection with the Northwest STACK? It seems that has been somewhat ignored by the industry to-date, but potential return profile now was pretty compelling and it seems like you and other operators are accelerating there. So, was just hoping you could provide your thoughts on what's been the primary driver behind increasing capital efficiency improvements, what would that be a new completion technique or something else?

You said it's been ignored, which is true. I don't think it's been publicized as much and as we talked about, we started drilling some Osage wells in late 2014 and into 2015, liked it there, tried a Meramec target and stepped mover to Major and try to lower Osage that we like and then tried out another Meramec, we're drilling long Meramec now, so I think it hasn't been publicized as much as the original stack that people think about, but was 13 operator there, there is a lot of activity. I think a few things have caused it to change or come about, changes in stimulation, design and techniques and long laterals. We under stimulated those first Osage wells with about 200 pounds per foot, even under stimulated our first Meramec well with I think 575 pounds per foot, so I think modern stimulations have helped. Targeting is a big issue here in this area. The Osage is very thick, 1,300-feet thick, so it's a big difference whether you are at the top, the middle or the bottom of the Osage. I think people have dialed in, they are targeting and in the Meramec, I think the Meramec's a little thicker than people might have imagined particularly as you go west and you can get a 50 foot to the east or 150 foot thick Meramec to the west, so that makes a very nice target for drilling and also you get some Osage contribution. So, I think it's a combination of all that. John, do you have anything to add to that?

Yeah. No, I think initially the Osage was kind of the target. It was a big thick interval and that's what enticed a lot of operators to come in and try to hit some good pretty gassy wells over there, but still some compelling rates. Our geological team was evaluating that during 2015 and 2016 as we started formulating our own plans. The Meramec just as I said in my discussion just really became kind of compelling when you started thinking about what you could do to the cost reduction by drilling extended laterals where you can and certainly as you mentioned the thickness, and then after our Meramec well that we drilled, really exciting, you know probably twice what our type curve is at the moment. So, we're at that as well as some of the other Meramec wells where we've seen so far and there is at least another dozen that are about to come online in the next 30 days. So, we're excited and it did get a bit of a slow start, but it's really kind of ramped up an industry interest.

John, also it had a slow start, because think about what's going on in 2015 and 2016, we were all cutting rigs, cutting CapEx, taking rigs offline. So, I think that's why it didn't get maybe as much momentum in the last year or two as it would have been a normal stable commodity price market.

Got it. That makes sense. Good for me. Thank you guys.

Thank you.

[Operator Instructions] Your next question comes from the line of Amer Tiwana with Cowen & Co. Your line is open.

Good morning. Hi, how are you guys?

Good morning. Thank you.

I have two questions. The first one is just a clarification on the LOE side, you know you gave range of $8 to $9 and I'm just wondering whether that is inclusive of the transportation costs? And secondly from just a year-over-year perspective, it's marginally higher. I know it's been coming down quite drastically. It seems as though maybe it's because of the production you know coming down a little bit, maybe the cost are now spread over a smaller production base as that, is the right way to think about it?

Yes Amer, you are right. So, the LOE guidance, does exclude the transportation cost as Julian mentioned in his prepared remarks, those are now deduct to the revenue, so you have no change to cash flow or EBITDA, but that LOE excludes the transportation, that's more in line with how the peers treat it. It does increase year-over-year and you are exactly right, you know with production down roughly 25%, you do have some fixed cost that you are spreading over lower production base. The teams have done a good job to reduce LOE, make moves in the field, take more use of our fully automated operation center and other things, less chemical use. We'll continue to drive that down, but it is up year-over-year on a Boe basis.

And just in terms of our exit – 2017 exit rate of production, where do you peg that at this point in time?

So 2014, I'm sorry 2016, we were at 4.3 million barrels of oil equivalent and that was 1.2 million barrels of oil. Q4 of 2014, we estimate 3.5 million barrels of oil equivalent with 1.1 million barrels of oil. So there is your exit rate for – entry rate really into 2017 and exit rate for 2017.

Okay. Understood. And lastly just, a bigger picture question regarding valuation and you know how we should think about it, clearly you know the enterprise is fairly trading at a significant discount to the PV-10 or no matter how – which metric you look at it, you know roughly four times EBITDA. How should we – first question is, why is that the case, because obviously the industry has you know much higher multiples and I don't find many companies trading at a discount. So, perhaps the first question and second you know what's the pathway to narrowing that discount or maybe trading at a premiums, is that because maybe we need to get back into a growth profile, is that the right answer?

It's a very good high level question, something that we think about, our PV-10 at the strip, UN strip is right about 950 million, you know the PDP component of that is around 730 million, so we're trading even at a slight discount to the PDP. I don't think that's rational or warranted. I'm not going to speculate exactly why? It could be a lot of reasons. We've only been out of restructuring for five months, just under five months now. There is not a lot of information out there about us. This is our first year end call, first full set of annual projections, so it could be from a lack of information out there, could be from a small flow. There is all kinds of different pieces around that. I think we need to do is do what we said we're going to do, which is execute here, show that we can generate good risk adjusted returns, keep generating cash from our Mid-Continent and deploy that into these two asset bases that we went through the Northwest STACK and even the North Park Basin, get a little more oily and show repeatable results. I think in time, the market will come around and recognize that we are performing and that we should not be trading at a discount. I don't know if time means, one month or one year, but I'm confident if we execute, do what we said we're going to do. We'll get rewarded for that in the market. So, yes, I do think it's undervalued now. I can't tell you exactly why we're just controlling the variables we can control here.

Thank you very much.

You are welcome.

Your next question comes from the line of Patrick Conner with Whitebox. Your line is open.

Thanks guys. Just a really quick question regarding just the last Page on 26, just a clarification question, it does note on the PV-10 valuations for December 31, 2015 and 2016 on the standardized, it shows that it included amounts attributable to the non-controlling interest. Does the 946 contain any non-controlling interest?

No. It does not.

Okay. That's all I had. Thanks.

You are welcome.

There are no further questions in the queue at this time. I will turn the call back over the presenters.

Thank you all for joining us. I appreciate this is our first year-end call and we're excited about the opportunities we have here. I'm trying to clearly articulate our strategy of maintain robust balance sheet, the high grade harvest of legacy and large Mid-Continent asset and there's exciting new opportunities we have particularly in this Northwest STACK. Look forward to seeing you on our first quarter call in May. Thank you.

This concludes today's conference call. You may now disconnect.